Journal of Innovation & Knowledge 9 (2024) 100587

Journal of Innovation
& Knowledge
ht t p s: // w w w . j our na ls .e l se vi e r .c om /j ou r na l -o f - in no va t i on -a n d- kn owl e dg e

Building an entrepreneurial ecosystem through Open Innovation fostered

by public policies

zqueza,*, Sandra Martín-Garcíab, Mar Ca
Juan R. Campos-Bla
rdenas-Mun
~ ozb
a
Universidad Auto
noma de Madrid, C/ Francisco Toma
s y Valiente, 5, Madrid 28049, Spain
b
ESIC Business & Marketing School, Avda. Juan XXIII, 12, Madrid, Pozuelo de Alarco
n 28224, Spain

A R T I C L E I N F O A B S T R A C T

Article History: Entrepreneurial ecosystems (EEs) are a growing focus for policymakers and academics seeking to foster inno-
Received 23 February 2024 vation and economic growth. While existing literature has analysed various aspects of EEs, limited research
Accepted 25 September 2024 has examined how public policies can contribute to their development. Through a single-case study, this
Available online xxx
study addresses this gap by analysing the role of a regional government in overcoming the challenges of
building an EE. We explore the creation and development of the Biscay Startup Bay (BSB) EE in Bilbao City
Keywords:
(Bizkaia, Basque Country, Spain). We describe the unique framework that they crafted and implemented,
Entrepreneurial ecosystem
highlighting the key attributes that generate value for all stakeholders. This single-case study of the BSB EE
Public policies
Open Innovation
in Spain offers valuable insights for policymakers seeking to design and implement successful Open Innova-
Entrepreneurship tion-driven approaches to creating and developing regional EEs.
Stakeholders © 2024 The Author(s). Published by Elsevier España, S.L.U. on behalf of Journal of Innovation & Knowledge.
This is an open access article under the CC BY-NC-ND license
JEL classification: (http://creativecommons.org/licenses/by-nc-nd/4.0/)
H20
H27
L26
L38
O36

Introduction interconnected actors for fostering and maintaining entrepreneurial

growth (Bouncken & Kraus, 2022; Fernandes & Ferreira, 2022), the
In developed countries, there is currently a heightened focus on role of inter-organisational networks in shaping the creation and
garnering public policy support to increase the number of high- evolution of EEs (Scott et al., 2022), the digital transformation of tra-
growth entrepreneurship ventures (HGEV) (Weissenbo €ck & Gruber, ditional markets into EEs (Song et al., 2022), and the influence of
2024). However, merely providing a supportive framework is insuffi- large corporations and institutions on predicting entrepreneurial
cient. The effectiveness of transactional forms of support for HGEV activity (Xin & Park, 2024).
(e.g., financial assistance) is proving to be limited, particularly at the However, limited research has analysed the specific contributions
post-startup level (Isenberg, 2010). One response to this challenge is of regional governments to the design, creation, and development of
the adoption of an entrepreneurial ecosystem (EE) approach. Thus, EEs in peripheral places (Bichler et al., 2022; von Bloh, 2021; Xu &
fostering EEs has become a crucial element of economic development Dobson, 2019).
in cities, regions, and countries worldwide (Mason & Brown, 2014). The capacity of the Internet to facilitate and foster the global flow of
The creation and subsequent growth of an EE depend on efficient information and knowledge creates conditions for a more enriching
and effective collaboration among interconnected stakeholders. and open ecosystem, albeit much more complex. Recently, there has
These stakeholders include universities, governments, entrepreneurs, been a whirlwind of innovation in powerful technologies such as artifi-
and private corporations. Research on EEs covers a broad range of cial intelligence, big data, cloud computing, and advanced robotics.
topics, methods, and fields of application, such as the role of family These advancements, including blockchain and APIs, have opened the
entrepreneurs in driving regional innovation through an EE (Bichler door for businesses to completely redefine their operations (Dahlander
et al., 2022), the importance of collaboration among various et al., 2021). This continuous change, occurring at an unprecedented
speed, compels organisations to better anticipate and be more prepared
to adopt new approaches to creating, innovating, manufacturing, com-
* Corresponding author. mercialising, and even financing (Campos-Bla
zquez, 2019).

zquez).
E-mail address: [email protected] (J.R. Campos-Bla

https://doi.org/10.1016/j.jik.2024.100587
2444-569X/© 2024 The Author(s). Published by Elsevier España, S.L.U. on behalf of Journal of Innovation & Knowledge. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/)

zquez, S. Martín-García and M. Ca
J.R. Campos-Bla
rdenas-Mun
~ oz Journal of Innovation & Knowledge 9 (2024) 100587

These changes have made companies more permeable to the results and discussion" presents and discusses the framework devel-
external world and ideas. This new approach is evident in the concept oped by the BSB and its main components. Finally, Section "Conclu-
of Open Innovation (OI), a term coined by Chesbrough (2003), which sions and implications" presents a comprehensive conclusion,
contrasts with the traditional Closed Innovation (CI) perspective. highlighting this study’s theoretical and practical implications, noting
Chesbrough described OI as the paradigm of innovation which its limitations, and suggesting avenues for future research.
assumes that firms can and should leverage both internal and exter-
nal ideas, as well as consider both internal and external paths to the Theoretical background
market. This has led large companies to be more inclined to partici-
pate in EEs, exchanging knowledge and information with startups to Entrepreneurship and entrepreneurial ecosystems
address exploratory strategic challenges (Vanhaverbeke, 2006) that
could result in disruptive innovation, subsequently aiding startup Entrepreneurship studies have a long history. In 1755, Cantillon
growth. was the first author to propose the term in its economic sense (Nij-
Over the past two decades, extensive research has been con- kamp, 2003), but the concept is complex and lacks a single definition
ducted on OI processes from various perspectives. Studies have (Xin & Park, 2024). Sahlman and Stevenson (1991, p. 1) wrote that
explored leveraging external knowledge and experience for idea gen- "entrepreneurship is a way of managing that involves pursuing
eration and problem-solving through crowdsourcing platforms opportunity without regard to the resources currently controlled.
(Brabham, 2013; Howe, 2006), as well as managing both external and Entrepreneurs identify opportunities, assemble required resources,
internal intellectual property (Chesbrough, 2003, 2006; Chesbrough implement a practical action plan, and harvest the reward in a timely,
& Ghafele, 2014; Resnick, 2011). Additionally, research emphasises flexible way". According to Baker et al. (2003, p. 256) it is reflected as
that business models are crucial for capturing value from innovation "a linear process in which entrepreneur volition leads to gestational
(Boudreau & Lakhani, 2009; Teece, 2010). Within OI, where success and planning activities", and involves ". . . the process of discovery,
relies on knowledge flowing across organisational boundaries, most evaluation, and exploitation of opportunities". It is worth noting,
research has concentrated on how these inflows and outflows can be however, that there has been criticism regarding this linear perspec-
optimised to benefit innovating corporations (Bagherzadeh et al., tive. It does not emphasise the complex, interconnected, iterative,
2020; Gutmann et al., 2023). and non-linear nature of entrepreneurship, which is influenced by
Despite the growing body of research on OI, a deeper understand- contextual conditions within the EE approach (Blank & Eckhardt,
ing of its role in business ecosystem development remains elusive 2023; Felin et al., 2024).
(Ferreira & Teixeira, 2019). Gao et al. (2020) further highlighted gaps From Baker et al. (2003) definition, three areas of research in the
in existing research and proposed directions for future OI studies. field of entrepreneurship emerge: (i) why, when, and how opportuni-
These include conducting empirical studies in diverse contexts to ties for the creation of goods and services are generated; (ii) why,
enhance the external validity of OI research, incorporating additional when, and how some people and not others discover and exploit
theoretical perspectives for novel insights, shifting the research focus such opportunities; and (iii) why, when, and how different courses of
from a firm-centric perspective to encompass macro- and micro-level action are used to exploit entrepreneurial opportunities (Shane &
analyses, and investigating collaborative innovation with stakehold- Venkataraman, 2000). Answering these questions is often more man-
ers—an underexplored perspective with promising potential for ageable within an EE.
deeper research. Traditionally, the focus has been on entrepreneurs as individuals
Our research focuses on two key areas: exploring the design, crea- with common intrinsic traits such as creativity, freedom/autonomy,
tion, and development of a regional EE under an OI perspective risk-taking, resilience, and continuous learning (Campos-Bla
zquez et
(Sekliuckiene et al., 2016), with policymakers playing a key role, and al., 2020). However, in recent years, attention has been focused on
identifying the best practices within an OI framework that can sup- the environment in which entrepreneurial activities are undertaken
port and maintain an EE. This study aims to contribute to Ches- (von Bloh, 2021; Xu & Dobson, 2019), otherwise known as EEs.
brough’s (2019, p. 2) call for “a renewal of our understanding of Open Grounded in ecological metaphors originally proposed by Moore
Innovation, and how we can get better business results from using (1993), popularised by Isenberg (2010), and aligned with the institu-
Open Innovation.” tional, technological, and industrial changes observed in numerous
Our research questions are formulated as follows: economies, it has become evident that an accurate analysis of the
entrepreneurship function must extend beyond individual entrepre-
RQ1: How can policymakers leverage OI principles to design, create, neurs. Consequently, the examination of EEs gradually evolved into a
and develop a regional EE that facilitates efficient knowledge distinct research field.
exchange and inclusive collaboration among all stakeholders? Consequently, the concept of EE swiftly gained legitimacy, becom-
RQ2: What specific characteristics of an OI framework contribute to ing a popular topic that attracted scholars from various disciplines
the development of an EE, and how can they be effectively and policymakers eager to understand how economic agents and
implemented? local conditions interact to stimulate productive entrepreneurship.
Despite being considered an integrative component of existing theo-
To address these questions, we conducted a single-case study ries such as economics and evolutionary theories, the ecosystem
using a systematic approach. This approach is based on a rigorous approach has proven to be effective in providing a robust theoretical
and predefined protocol to examine the experience of the Provincial framework for both research and policy. Specifically, it is seen as a
Council of Bizkaia (PCB) in creating and developing the Biscay Startup regional economic development strategy based on the creation of
Bay (BSB) EE in Bilbao, the capital of Bizkaia in the Basque Country supportive environments that encourage innovative startups (Spigel
(Spain). & Harrison, 2018). Earlier research recognised a co-evolutionary rela-
The remainder of the paper is structured as follows. Section "The- tionship between entrepreneurs, institutions, and other actors within
oretical background" draws upon existing literature to discuss the the ecosystem, all of which support regional economies and startup
concepts of entrepreneurship, EEs, and OI. Section "Method" outlines development (Feld, 2012).
the research design for the data collection and analysis. Section Defining an EE is a primary concern. Scholars concur that entre-
"Entrepreneurial activities in the Basque Country" explores entrepre- preneurship surpasses business formation rates at a territorial level.
neurial activity in the Basque Country and Bizkaia and provides Unlike traditional entrepreneurship studies, the EE framework
insights into the region’s entrepreneurial landscape. Section "Case emphasises the role of a spatially defined context in supporting
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J.R. Campos-Bla
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entrepreneurial actions, and how it impacts both the ecosystem’s business model" (Chesbrough & Bogers, 2014, p. 17). By effectively
constituents and territorial outcomes. In this regard, Cohen (2006, p. managing these knowledge flows, organisations can leverage exter-
3) defined EE as "an interconnected group of actors in a local geo- nal expertise and accelerate innovation.
graphic community committed to sustainable development through According to this definition of OI, firms are encouraged to
the support and facilitation of new sustainable ventures". More embrace both internal and external sources of ideas along with inter-
recently, Autio et al. (2018, p.74) emphasised the importance of digi- nal and external paths to the market to advance innovation. OI pro-
talisation and defined the ecosystem as "a digital economy phenome- cesses facilitate the integration of internal and external ideas into
non that harnesses technological affordances to facilitate platforms, architectures, and systems. Business models play a crucial
entrepreneurial opportunities pursued by new ventures through rad- role in defining the requirements for these architectures and systems
ical business model innovation". in the context of OI.
Although there is no unique definition, EEs have four common Furthermore, OI emphasises the importance of leveraging both
features: "(i) there are various actors and resources involved in the internal and external ideas when designing business models. This
ecosystem such as entrepreneurs, customers, firms, venture capital, ensures value creation while outlining the internal mechanisms for
universities, culture and market; (ii) it is essential for actors within capturing a share of that value.
the ecosystem to maintain continuous healthy and dynamic interac- OI relies on two important knowledge flows: Outside−In and
tion; (iii) the ecosystem needs to be productive, with productivity Inside−Out. Outside−In OI involves opening a company’s innovation
potentially realised in different forms such as jobs or revenue processes to a variety of external knowledge inputs and contribu-
growth; and (iv) whilst ecosystems may vary in size, there should be tions. While Outside−In has received significant attention in both
an element of spatiality/locality" (Xu & Dobson, 2019, p. 410). In sum- academic research and industry practice, with a focus on areas such
mary, the EE is perceived as a dynamic, spatially defined framework as technology scouting, crowdsourcing, open-source technology, and
that facilitates interaction among various economic and political technology licensing, it is important to recognise that OI encom-
agents, thereby fostering productive entrepreneurship through passes a broader scope (Chesbrough, 2024).
improved resource mobilisation processes, and contributing to terri- OI also involves a critical but less-explored dimension: Inside−Out
torial outcomes (Acs et al., 2023). knowledge flow. This approach requires organisations to make
underutilised knowledge available for external use by others in their
The Open Innovation paradigm business and business models. This can involve licensing technology,
spinning off new ventures, or forming new joint ventures with exter-
The concept of OI has emerged as a transformative paradigm for nal partners. In contrast to the well-researched Outside−In approach,
managing innovation processes. Initially, Chesbrough’s (2003) semi- Inside−Out OI is less understood in both academic research and
nal work relied heavily on qualitative evidence, particularly in-depth industry practice.
case studies of technology companies, to establish the value of this A recent development in OI is the concept of Outside-Out OI. This
new approach. A key takeaway from this early research is the approach represents an evolution of OI practices, extending its princi-
expanding scope of OI. While collaborations and partnerships ples beyond the traditional focus on new product or service develop-
between organisations remain crucial, the concept now encompasses ment. By embracing a broader range of partners, adopting flexible
a broader landscape including supply chains, networks, ecosystems, governance structures, and aligning with the innovation ecosystem,
and public-private partnerships. This shift in focus emphasises that organisations can leverage Outside-Out OI to drive innovation across
OI extends beyond the firm itself, recognising the significance of the various aspects of their business (Vanhaverbeke & Gilsing, 2024).
surrounding innovation ecosystem (Chesbrough, 2024). Furthermore, In summary, OI aims to leverage the knowledge and skills of a
as Radziwon et al. (2024) suggested, fostering a thriving OI environ- broader network to create a more collaborative and flexible approach
ment requires the development of physical or digital ecosystems and to innovation. By integrating external inputs and fostering open col-
a growth infrastructure to support the activities of innovating organi- laboration, companies can enhance their innovation potential and
sations. better navigate the complexities of the current market environment.
The OI paradigm assumes that companies can and should inte- The adoption of OI involves not only strategic and operational
grate ideas, knowledge, and resources, using both internal and exter- changes but also cultural and technological transformations that col-
nal sources. This approach fosters the development of new products, lectively drive an organisation towards sustained innovation and
services, or processes, and can expand design capabilities, mitigate competitive advantage (Chesbrough, 2024).
risk, and increase an organisation’s revenue. In contrast to the CI
model, where companies primarily rely on internal resources and Method
limit external participation, OI involves collaboration with external
partners, such as customers, suppliers, universities, startups, or other Research design
organisations (Chesbrough, 2003, 2024; Loren, 2011). Table 1 sum-
marises the key differences between OI and CI. According to the literature, EEs represent an emerging topic. For
OI is "a distributed innovation process based on purposively man- this reason, we adopted a qualitative methodological approach, spe-
aged knowledge flows across organizational boundaries, using pecu- cifically a single-case study, to gain a detailed understanding of the
niary and non-pecuniary mechanisms in line with the organization’s studied phenomenon (Table 2). This approach involves constant

Table 1
Main differences between OI and CI.

Element Open Innovation Close Innovation

Source of ideas Actively seeks external contributions and ideas Primarily relies on internal capabilities
Level of Collaboration Collaboration with a broad external network Limited collaboration, often internal teams
Developmental Approach May involve co-creation with external stakeholders Internal development of products or services
Intellectual Property (IP) Agreements to share or license IP with external partners IP typically kept internal
Flexibility Favours flexibility and adaptability through open collaboration Tends to be more hierarchical and structured

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Table 2
Case study data.

Purpose of research Analyse the role of public policies in building and consolidating regional entrepreneurial ecosystems. Identify the characteristics of
Open Innovation that help to develop an EE, and how they can be effectively implemented
Methodology of research Single holistic case study (single unit of analysis). Descriptive, exploratory, and theory-building study
Single unit of analysis Biscay Startup Bay entrepreneurial ecosystem
Type of sample Logical and theoretical sample (capacity of transferability of the phenomenon studied), non-random (sampling and statistical
generalization
Sample Single case.
Evidence-gathering methods Documentary review (documentation and archives). Multiple semi-structured interviews with open-ended questions. Use of physi-
cal, technological, and culture artefacts.
Information sources Internal:
 Documentation (internal reports and studies), files (intranet, presentations, and audiovisual material).
 In-depth interviews.
 Real physical context.
External:Public information (Biscay Startup Bay website and other websites).
Key informants 12 senior managers and founders from several stakeholders.
Methods of analysing the evidence Essentially qualitative:
 Search of key success factors.
 Search for critical challenges.
 Identification and description of the elements of the model implemented.
 Analysis of critical decisions.
 Use of computational tool to identify patterns and relationships between variables through trees, clouds and word diagrams, and
other grouping criteria provided by the quality analysis tool ATLAS.ti.

Scientific approach Analytical induction through replication logic (analytical generalization).

Evaluation of the methodological Validity (constructive, internal, and external), reliability, consistency (contextual and theoretical − interpretative).
rigor and quality
Data conducted October 2022−November 2023

comparison, cycling between data collection, data analysis, and fur- queries. In these discussions, we aimed to address the following
ther data collection based on emergent themes (Corbin & Strauss, questions, among others:
2008). We examined the BSB’s experience in creating and developing
its EE, with a special focus on the applied public policies, type of net-  What was the origin of the BSB initiative?
works fostering collaboration, innovation activities pursued, and  What was the process followed for its design and subsequent
achieved innovation outputs. Its application in this research is implementation?
grounded in an exploratory, descriptive, and theory-building  What does this initiative entail?
approach (Eisenhardt & Graebner, 2007).  How does it contribute to the creation of new ventures?
 What has been the social impact of the BSB?
Case selection
We conducted nine formal individual or in-pair interviews with
After defining the unit of analysis, we conducted a screening 12 informants; eight were conducted face-to-face, and one was con-
within Spain and identified five EEs in major cities, each with distinct ducted via Microsoft Teams. All interviews lasted between 60 and
characteristics. Barcelona, with its 20-year commitment to 22@ Bar- 90 min, were recorded using an MP4 recorder, and were then tran-
celona and its highly successful founders, is largely organised through scribed verbatim. Additionally, we maintained an ongoing dialogue
Pier 01 Barcelona Tech City, with significant private influence. Madrid with our main contacts to review or clarify any doubts or potential
stands out as the capital of Spain with the presence of large corpora- misunderstandings, using video conferences, telephone calls, and
tions. Valencia, anchored by Lanzadera—a philanthropic accelerator emails. Table 3 presents the number of interviews conducted for each
established in 2013 by Juan Roig, founder of the nation’s renowned stakeholder category. The interviews are listed as I1−I12, with no dif-
supermarket chain Mercadona—and supported by other players such ferentiation between the interviewee subgroups to maintain ano-
as Go Hub, Plug and Play, Innsomnia, and Demium, has developed an nymity. The finite number of BSB EE actors allowed us to draw
innovation district in the Marina. Ma
laga focuses on public initiatives conclusions easily. The numbering does not follow a specific order.
to attract digital talent, while Bilbao features the BSB initiative cre- Furthermore, we had the opportunity for a full immersion in the
ated by the PCB. BSB, during which we obtained additional background information
After assessing the opportunity to explore a novel combination of that significantly enriched the social context of the case study. This
public policies and the willingness of managers from different stake- immersion provided us with a valuable understanding of various
holders to commit to this research, we chose to analyse the BSB. aspects related to the physical environment, including the location,
common area, meeting rooms, and canteen at the BSB.
Data collection and analysis Regarding data analysis, the initial stage involved structuring the
data according to a preliminary coding list established ex ante, based
Concerning data collection, we utilised methodological triangula- on a review of the existing literature (Miles & Huberman, 1994). The
tion by employing multiple perspectives to converge on the phenom- dimensions considered in this process were: (i) entrepreneurial cul-
enon and validate the data. Between October 2022 and November ture − community; (ii) funding and investment, coordination of found-
2023, we gathered evidence through reviews of internal and external ers, business angels, and Venture Capital; (iii) public policies to
documentation, conducted multiple in-depth interviews with key promote entrepreneurship, focusing on financing, subsidies, and tax-
informants, and used physical, technological, and cultural artefacts to ation; (iv) talent attraction and education; and (v) corporations and
record interviews and produce photographs (Yin, 2017). their participation in the BSB.
The interviews followed semi-structured, open-ended guidelines, The interview transcripts were carefully reviewed on multiple
adopting the form of guided conversations rather than structured occasions to discern and apply suitable codes. The coding list was
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Table 3 and tools for entrepreneurship at all stages and types, representing a
People interviewed per stakeholder category. total budget of more than EUR 96 million.
Stakeholder category Number of
people interviewed Bizkaia context
Entrepreneur 3
Economy development agency/administration 3 Bizkaia is the largest of the three Historical Territories of the Bas-
Politics 1 que Country, with its capital in Bilbao. At the turn of the 20th century,
Higher education institution 1 Bizkaia was an economic and financial hub in Europe, experiencing
Large corporation 2
growth driven by shipbuilding and steel mills, and housing one of the
Accelerator/incubator/co-working administration 1
R&D Technological center 1 busiest ports on the continent. Bizkaia has successfully transformed
from an industrial-based territory into an international reference
point for business and tourism without losing sight of its roots
(Startup Genome, 2023).
subsequently refined, adapted, and detailed. The final coding analysis From an economic perspective, the Basque Country, particularly
was conducted independently by two distinct researchers to bolster Bizkaia, ranks among the most industrial and innovative regions in
reliability, following the approach outlined by Eisenhardt (1989). Any Europe, with innovation performance surpassing the EU-27 average
variances in data interpretation and codes were deliberated until a (109.8 %). The Basque Country leads the national rankings and is rec-
consensus was reached between the two researchers. ognised as a "hub of excellence", a highly innovative region within a
In the second stage, the data were classified according to the five country classified as having a moderate level of innovation. Its pri-
aforementioned dimensions, allowing for a specific analysis of the mary strengths lie in the advanced qualifications of its young popula-
sample. A detailed analysis of the evidence was performed by apply- tion, the substantial impact of innovation on sales of new products,
ing the qualitative analytical tool Atlas.ti 9 to the data from the nine and the high percentage of individuals engaged in lifelong learning.
interviews and the reviews of internal and external documentation This distinction is shared by Madrid in Spain, Prague in the Czech
(Friese, 2011). To identify the patterns and relationships between the Republic, Athens and Crete in Greece, and Emilia-Romagna in Italy.
dimensions, a thematic search was conducted using the following Euskadi ranks 72 out of the 239 innovative European regions ana-
keywords: economic development, talent attraction and retention, mul- lysed (Hollanders & Es-Sadki, 2023).
ticorporate, taxation, knowledge sharing, innovation, entrepreneurship, Bizkaia has a diverse economy, with services constituting 73 % of
Open Innovation, and locality. its GDP. Industry, construction, and agriculture contribute 20 %, 6 %,
and 1 %, respectively. This balanced distribution reflects the provin-
Entrepreneurial activities in the Basque Country ce’s economic stability and development (Franco & Wilson, 2022).
Both Euskadi and Bizkaia are known for their industrial structure,
The Basque Country particularly in the energy sector. Prominent companies in the region
include Iberdrola, which ranks as the second-largest market capital-
The Basque Country is an autonomous region with approximately isation on the Ibex and the third-largest utility globally. Petronor, a
2.2 million people located on Spain’s northern coast, bordering subsidiary of Repsol with approximately 86 % ownership and a 14 %
France. Its GDP per capita ranks in the top 10 % of EU regions, and it stake held by Kutxabank, leads the Basque Hydrogen Corridor (BH2C)
has one of the lowest poverty rates. The region’s robust industrial and plays a key role in the entire energy sector value chain.
sector accounts for 23 % of its GDP, and its unemployment rate (8.3 %) In the realm of mobility, Gipuzkoa features two major Original
was below Spain’s national average (11.8 %) in 2020 (FitchRatins, Equipment Manufacturers (OEMs), Irizar and CAF, while Bizkaia is
2023). home to global Tier 1 and Tier 2 companies such as Gestamp, CIE, and
According to the Basque Government’s Global Entrepreneurship Maier. Finally, thanks to its Industry 4.0 business framework, Bizkaia
Monitor Report, GEM Basque Country (Saiz-Santos et al., 2023), the excels in sectors where it acts as a model and is able to compete glob-
region hosts more than 1000 startups employing over 8000 people, ally with any ecosystem.
with an estimated valuation exceeding EUR 1500 million. This eco-
system is closely intertwined with its manufacturing sector, where
Case results and discussion
seven out of 10 startups develop solutions for the Basque Country’s
strategic sectors.
In this section, we describe the decision-making process followed
Concerning employment, technology-based and/or innovative
by the PCB to create the BSB EE that arose in the case study. Subse-
companies created in recent years employed an average of eight
quently, our focus shifts to the implemented model as it emerged
workers per company and achieved a turnover exceeding EUR
from the interviews.
750 million in 2021. Moreover, the startup survival rate is strong,
exceeding 80 %.
The starting point
Regarding investments, notable growth is observed in the number
of active funds in the region, boasting more than 130 active invest-
Based on the industrial and technological structures described in
ment stakeholders, both public and private. The report highlighted
Section "Bizkaia context", the PCB team decided to invest in creating
sustained growth in both the number and total amount of investment
and developing an EE in the capital city of Bilbao.
rounds. Over the past two years, more than EUR 198 million has been
mobilised across 300 investment rounds, with 70 % coming from "To achieve this goal, in 2017, we conducted fieldwork, including a
regional or state investment funds and 30 % from European invest- global benchmarking study on entrepreneurial ecosystems across
ment funds. various defining areas. . . Specifically, given the unique jurisdiction of
The report underscores the ecosystem’s unique public support, the Provincial Council of Bizkaia, at the fiscal level, we analysed
where a network of over 100 public and private stakeholders collabo- implemented fiscal measures in London that led to the development
rates to create an optimal environment for launching, developing, of an entire fintech ecosystem. In addition, we explored Amsterdam
and growing innovative and/or technology-based businesses. This is for the role played by the Department of Finance in attracting invest-
substantiated by the fact that, in 2022, Basque public and private ment to the country, recognising the importance of the tax ruling"
stakeholders provided nearly 800 support programmes, initiatives, (I2, I3).
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Next, they focused their analysis on the dimension of entrepre- realisation laid the foundation for the design and implementation of the
neurial culture within an EE. In this study, four ecosystems—Boston, Biscay Startup Bay strategy" (I2, I3).
Tel Aviv, Barcelona, and Helsinki—were examined. Below are com-
ments on the ecosystems of Boston and Tel Aviv. Biscay startup bay entrepreneurial ecosystem framework
"The business ecosystem in Boston is built on four pillars: an organ-
The main strengths of the BSB are:
ised ecosystem involving all stakeholders; significant universities
such as MIT and Harvard, where top-tier technical performance com-  Decisive political drive: Unlike other hubs that rely on private,
bines with entrepreneurship, and students are surrounded by indi-
philanthropic, or university involvement, following the American
viduals who have started companies and secured funding; broad
model, "in our case, it was the Head of the Provincial Council himself
access to the talent necessary for founding a company, as well as
who led the project" (I2). Therefore, various public agencies have
resources (lawyers, advisers, mentors) familiar with the startup
focused on entrepreneurship and innovation, including the eco-
world; and finally, access to capital, with investors well-versed in the
nomic development agency (BEAZ), the agency dedicated to
startup scene actively participating in the boards of new companies
attracting and retaining talent (Bizkaia Talent), and the public
(Smart capital). . .
venture capital fund (Seed Capital), all aligned with this strategy.
. . . Regarding the Tel Aviv ecosystem, we draw several lessons. The  Multicorporate: As mentioned above, the Basque Country, and
most important one is the significant role of public policies in the cre- Bizkaia in particular, is characterised by a large number of multi-
ation of the so-called Startup Nation, with initiatives including the national companies headquartered in the region. These compa-
establishment of the Office of the Chief Scientist in 1968 to aid in the nies operate in specific sectors such as Energy, Mobility, and
commercialisation of advanced technology; the launch of the Busi- Industry 4.0. "An example of this is that 20 % of our GDP belongs to
ness Incubator Programme in the 1990s; and the Yozma initiative to the industrial sector, and nearly 20 % of employment is in the same
generate a venture capital industry in Israel, along with a specific sector. This proximity and closeness to the industry allow for effective
programme to attract foreign researchers to the country" (I2). collaboration" (I4).
 Taxation: The Basque Country and Bizkaia are unique cases in
At the incubator and accelerator levels, engagement with those Europe, and "I would venture to say, globally. While not being a
deemed most relevant provided insights into how to structure an state, it has normative capacity over direct and indirect taxation.
international entrepreneur centre, the value-added services provided This grants the region the ability to have a tax capacity to influence
by accelerators, and the process of building a community. The follow- key strategic areas" (I11). In this case, an Entrepreneurship Tax
ing international entrepreneurship centres were analysed: Statute was implemented.

"Cambridge Innovation Center (CIC) is one of the prominent incuba- Once these strengths were described, a framework was designed
tors in the USA. Linked to MIT, CIC was founded in 1999 by Tim Rowe consisting of four pillars that characterised the uniqueness of the BSB
with the goal of fostering an EE. Beyond serving as an incubator, EE: concentration, connectivity, multicorporate, and taxation, as
what sets CIC apart is its emphasis on ecosystem and community- shown in Fig. 1.
building. Since its inception, CIC has raised over 3 billion in venture
capital and has generated more than 40,000 jobs. They have also pio- Concentration
neered the non-profit Venture Coffee, featuring programmes like Every EE needs a physical infrastructure, a "lighthouse" where
Captains of Innovation to connect startups with corporations. . . local and foreign startups, corporations, and investors can converge.
. . . SOSA, which describes itself as a combined incubator-accelerator, This hub facilitates cross-pollination among players from different
connects early-stage technological startups with key partners in the ecosystems and is ideal for soft landings.
ecosystem, including major corporations and investors, providing The selection of the International Entrepreneurship Centre’s loca-
robust mentoring. Comprising the most influential venture capitalist tion was crucial. After analysing other global centres, such as those in
in the Tel Aviv ecosystem, with two locations in Tel Aviv and a downtown areas of cities like Boston and Tel Aviv, "we aimed for
recently established one in New York. . . iconic and well-connected places, easily accessible by walking, biking, or
public transportation. Additionally, they should be vibrant even after
. . . Talent Garden, originating in Italy, is a coworking centre network working hours" (I1).
with a strong presence across Europe, particularly in Southern After considering various buildings in Bilbao, the former BBVA
Europe. It fosters community by providing startups access to its loca- headquarters in Plaza Circular was identified as meeting all the
tions and places a significant emphasis on training, catering to both requirements. This 19-floor building, centrally located with the first
startups and corporations. . . five floors occupied by Primark, was leased from the sixth to the 19th
. . .Station F is positioned as the premier incubator for corporates. A floors by the PCB. This location, steeped in the history of being one of
concerted public effort aims to establish it as the new European tech the leading banks in the region, became the site for the development
hub and the largest startup campus in Europe. Spanning 34,000 m2, of the International Entrepreneurship Centre in Torre Bizkaia, also
it is in a former railway station in Paris, housing major French com- known as the Biscay Accelerator Tower (BAT).
panies such as LMHV, Thales, TF1, HEC, among others. These compa- The BAT is not managed by public entities but by a globally recog-
nies leverage Station F for their Open Innovation initiatives and nised operator. A global public tender in 2020 led to the selection of a
acceleration programmes. Additionally, it boasts an intriguing hous- joint venture between PricewaterhouseCoopers (PwC) and Talent
ing policy to accommodate entrepreneurs" (I2). Garden to manage the BAT.
The project was divided into three phases. The first phase, cover-
Finally, the programmes of the following four accelerators were ing floors six to nine (4400 m2), opened in September 2022. Subse-
analysed: Techstars, Plug and Play Tech Center, Y Combinator, and quent phases involved occupying an additional 4000 m2 from the
Dreamit Ventures. 10th to the 14th floor, along with two more floors, the 15th and 16th,
After conducting this benchmarking, along with evaluations covering 1500 m2.
involving other key stakeholders, the conclusion reached was both Given that the community is central to the OI framework, the pri-
simple and intricate: "every EE must build upon its strengths. This mary goal of the centre is community-building. It offers flexible cow-
orking spaces, private offices, meeting rooms, and 24/7 services. It
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Fig. 1. BSB EE framework. Source: Biscay Startup Bay.

also provides access to shared spaces and associated services, such as Maintaining alliances with major players is crucial for the interna-
reception, business resources, tech support, fiscal domiciliation, fast tionalisation and visibility of the BSB EE. Collaborations with Tech-
tracking, and mentoring. stars and the South Summit involve events to energise the local
Aligned with its community-building goal, the centre focuses on ecosystem with international players.
six pillars: (i) Technological Innovation, fostering technological and
innovative talent in the region; (ii) International Ecosystem, leveraging Multicorporate
the PwC and Talent Garden network for access to other operator As highlighted earlier, one of the distinctive features of the BSB is
centres and priority hubs; (iii) Value-Added Services, providing advi- the significant number and quality of corporations in the region, con-
sory services for innovation plans, access to affiliated agents, and tributing to 20 % of GDP and employment. This region excels in three
enhanced funding models; (iv) Physical Space, as previously dis- global verticals:
cussed; (v) Sectoral Focus in three main vertical sectors (energy,
mobility, and foodtech) and one transversal sector (Industry 4.0); and  Energy: This consists of two major companies: Iberdrola (the
(vi) Public Support. third-largest utility in the world) and Petronor (a leader within
the Repsol group). Additionally, energy companies such as ABB
"The BAT aims to be more than just physical infrastructure, creating a
and Schneider contribute to more than 30 % of Bizkaia’s revenue
space where startups, corporations, investors, and the university
and over 15,500 direct jobs.
coexist, organising over 100 events annually to connect people, ideas,  Mobility: Although lacking major OEM in this vertical, Bizkaia has
and projects. Activities include investor sessions, webinars, streaming
significant Tier 1 and 2 companies such as Gestamp, CIE, Maier,
events, Innovation Week, Investors Days with other affiliated ecosys-
and the MCC group.
tems, community breakfasts, morning talks, sector-specific events,  Industry 4.0: Given the industrial structure of the region, digital-
and after-work gatherings" (I1, I5, I6, I7, I8, I12).
isation is a key focus and differentiating vector.

Inspired by the experiences of the Boston and Tel Aviv ecosystems

Connectivity regarding how corporations collaborate with startups under OI prin-
As revealed through benchmarking, "our ecosystem was conceived ciples, missions were organised with corporations in these ecosys-
with a core emphasis on connectivity. Bilbao, while not a Tier 1 city like tems to understand and encourage OI collaborations. Moreover, as
Barcelona or Paris, recognises the significance of being well-connected. with PCB, "we decided to join the European Open Innovation Forum, led
Learning from global ecosystems in Tel Aviv, Boston, Austin, and Helsinki, by Henry Chesbrough, to learn from the best and the pioneer of Open
we continue to organise internships in these locations for startups within Innovation. In fact, we have implemented some of the network’s recom-
our ecosystem. These initiatives not only provide attractive deal flows for mendations and Chesbrough has visited Bizkaia twice to sensitise our
our local corporates, but also serve as ideal environments for our start- corporations" (I2, I3, I8).
ups to accelerate" (I1, I2). Following these best practices and differentiating itself from other
Furthermore, "we have established connections with nodes in Latin ecosystems, one of the objectives of the BSB strategy is to avoid creat-
America (Tec de Monterrey, Chile, Bogota), Singapore, and Japan. Our ing silos among corporations, steer clear of vertical collaborations,
tax-friendly environment and public funding opportunities position BSB and promote horizontal collaborations. That is, fostering interactions
as a platform for soft landing and R&D activities for companies from not only Outside−In but also from the Inside−Out. Following Ches-
these regions" (I2). To attract startups and corporations from outside brough’s (2003) funnel model, the BSB EE aims to encourage corpora-
the Basque Country, "we have structured and packaged existing subsidy tions to share projects and patents.
lines in the Provincial Council for those deciding to develop their projects To incentivise the Outside−In strategy from a public funding per-
or R&D units in Bizkaia" (I3). spective, a fast track was established with their venture capital fund,
Collaboration with the operator, a joint venture between PwC and Seed Capital. Through another PCB grant programme, "we finance
Talent Garden, allows startups and corporations in the BAT to access innovation plans of corporations to aid in sensitisation and work on
all their centres based on their interests. Open Innovation. We are also collaborating with Corporate Venture
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Capital from various corporations in the ecosystem to accelerate their investments in capital expansion for new products or markets.
deal flow in the territory. Furthermore, we are encouraging the possibil- No wealth tax is levied on equity held during the investment
ity for local corporations to participate or establish acceleration pro- period. Upon exit, a 50 % exemption on capital gains results in an
grammes. In collaboration, if an accelerator invests in a startup, the start effective tax rate of 12.5 %. If startups, technology companies, or
fund, linked to Seed Capital, is established to match, in a participatory innovative projects are reinvested in the next two years, the
loan model (with a two-year grace period), the investment made by the exemption increases to 100 %. Additionally, a Loss Compensation
accelerator up to a maximum of 100,000 euros" (I3). System has been established to offset failed investments against
This strategy emphasises horizontal collaboration among corpora- other investor incomes, following a successful model imple-
tions, avoids silos, and encourages collaboration across sectors. mented in London to incentivise the fintech industry.
A unique aspect of the BAT’s development is that it is structured Workers with equity receive similar treatment to that of founders.
using specific scale-ups. However, no tax is imposed on phantom shares or similar rights,
which are common in startups. At the time of exit, payments ranging
 Global smart grid hub, led by Iberdrola, concentrates all of the from 20 % to 25 % are made, but only at that moment.
company’s global knowledge on Smart Grids. It is equipped with For both foreign workers and Spaniards who have resided abroad
cutting-edge technological infrastructure in which present-day for more than five years, a unique regulation has been established in
and projected group suppliers, as well as startups, come together. personal income tax. For over 11 years, a 30 % exemption from per-
The connection with the BAT is complete, as not only is Iberdrola sonal income tax on salaries was granted. An additional exemption of
one of the BAT’s members but startups under its orbit are located up to 20 % is provided for relocation expenses, including rent, sup-
in both locations. plies, schools, travel (twice a year for the entire family), and moving
 European Innovation Council (EIC) hydrogen, is a new scale-up expenses. Furthermore, an exemption from wealth tax applies to
initiative focused on the hydrogen sector, led by Petronor. The gains from foreign-owned capital assets, extending to spouses,
building features technological infrastructure designed for user cohabiting partners, and family members.
utilisation.
 Automotive Intelligence Centre (AIC) was inaugurated in 2007 "The emphasis on corporations as a differentiating foundation of the
ecosystem is reflected in fiscal incentives. At the time of investment, a
and focuses on addressing the challenges of mobility in technolog-
deduction of up to 35 % is granted for investments in innovative com-
ical infrastructure and academia.
panies, with a limit equivalent to the deduction base of 25 % of capital
and 35 % of tax. Excess deductions can be applied over the next
The entire ecosystem is integrated, breaking down silos and
30 years. A 65 % reduction in the tax base is facilitated with a special
encouraging collaboration between startups and corporations. As one
reserve for promoting entrepreneurship and reinforcing productive
corporation stated, "our company has a powerful tractor effect that
activity. No taxes are paid on exit gains, and a Loss Compensation
helps startups in several manners: firstly, by advancing financing, with-
System is established to offset losses from failed investments against
out repayment guarantee, in the initial phase of product development,
other investor income (profits from other businesses, other income,
supported by the 64bis tax article; secondly, by working with our techni-
etc.)" (I3).
cians to develop a new product under the specifications provided by us
in order to respond to our needs in smart grids; and finally, the most
important one, to become a qualified supplier of our company" (I8, I9). An innovative secondary market, driven by the so-called 64bis
system (Fig. 2), allows R&D-intensive companies, primarily startups,
Taxation to sell R&D tax credits to corporations paying corporate income taxes.
The PCB, empowered by the Historical Territory law and its rich Under the legal security provided by the economic development
traditions, has the authority to collect and manage all taxes in its ter- agency (BEAZ), corporations purchase tax credits at a 20 % discount,
ritory, except customs duties, mirroring the fiscal autonomy of a yielding a 120 % return on milestones at the start of the startup’s R&D
state. "Internationally, this autonomy became a pivotal and distinctive project.
aspect, drawing inspiration from the fintech ecosystem model of London. The fiscal incentive policy for R&D remains robust, offering deduc-
This model was instrumental in fostering innovation and entrepreneur- tions of 10 % for investments in non-current assets between 30 % and
ship, particularly in the financial sector" (I3). 50 % for R&D activities, and between 15 % and 20 % for technological
Bizkaia’s taxation is notable for its clarity; the Treasury provides innovation. Additionally, job creation allows for a 25 % deduction in
binding responses to inquiries and maintains an approachable the annual gross salary, capped at 50 % of the minimum wage. Invest-
demeanour, largely facilitated by the manageable dimensions of the ments and expenses associated with sustainable development, con-
territory. To prevent double taxation, agreements are in place, and it servation, environmental improvement, and the use of more efficient
prides itself on being a transparent fiscal authority. energy sources receive a 30 % deduction.
Historically, Bizkaia has demonstrated a commitment to R&D, To encourage early-stage investments, especially from angel
with deductions reaching up to 70 % of the quota, incentivising the investors, family members, and friends, a specific fiscal incentive pol-
hiring of research staff and featuring a patent box. In total, deductions icy was established. This includes a 35 % deduction in personal
could reach 80.5 % of the quota, factoring in a limit of 70 % applied income tax for investments in technology companies made within
after subtracting those capped at 35 %. Recognising the need for the first seven years of the company’s life, with a limit equivalent to
more, an entrepreneurship tax statute was developed with a compre- 20 % of the personal income tax base for the year. If the deduction
hensive 360° vision covering all stakeholders in the EE, including exceeds this limit, the excess can be applied in the following five
founders, workers with equity or phantom shares, corporations, years. An additional 35 % deduction is granted for investments in cap-
alternative financing entities, venture capital, private equity, talent, ital expansion for new products or markets. No wealth tax is paid
and investors. during the investment period, and upon exit, a 50 % exemption from
During the investment phase, founders are granted a 35 % capital gains results in an effective tax rate of 12.5 %. If startups, tech-
deduction in personal income tax if they invest in technology nology companies, or innovative projects are reinvested in the next
companies (within the first seven years of the company’s life), two years, 100 % of the gains are exempt. Additionally, a Loss Com-
with a limit equivalent to 20 % of their personal income tax base pensation System was established for failed investments, allowing
for the year. If the limit is exceeded, the excess can be applied in investors to offset losses against other income, such as salary or divi-
the subsequent five years. Another 35 % deduction applies to dends.

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Fig. 2. 64bis tax article framework. Source: Biscay Startup Bay.

For Venture Capital vehicles, returns derived from participation, 2024). We demonstrate how OI practices fostered by regional gov-
shares, or other rights granting special economic rights are consid- ernments can be implemented to develop a regional EE.
ered work income. They are integrated into the taxable base at 50 %, Fourth, our research expands the understanding of OI by analy-
resulting in a maximum effective tax rate of 24.5 %. Therefore, the sing it at the inter-organisational network level within an EE, moving
carried interest is taxed at 24.5 %. beyond the traditional focus on large firms (Chesbrough, 2003). This
In summary, Bizkaia has pioneered a comprehensive entre- approach reveals how OI can support new ventures not only in
preneurship tax statute, setting it apart from other European ecosys- achieving financial success but also in scaling their social and envi-
tems. ronmental impacts (Weissenbo € ck & Gruber, 2024). Effectively man-
aging an EE is crucial in this context, as OI extends beyond the
Conclusions and implications bilateral insourcing of externally developed technologies. Organisa-
tions must actively identify strategic partners, nurture the ecosystem,
In this section, we describe the contributions of our study to the minimise tensions between collaborators, and foster a shared vision.
literature on the creation, development, and consolidation of a EEs provide a robust structure for inter-firm relations, facilitating col-
regional EE, with a special emphasis on the public policies developed laboration while also potentially constraining individual interactions
and how they have encouraged OI collaborations between corpora- between specific companies.
tions and startups, as well as among corporations. The implications Finally, our research demonstrates how the adoption of OI practi-
for policymakers, along with a discussion of the limitations and ave- ces within the BBS contributed to achieving the four key features of a
nues for future research, conclude this study. successful EE as outlined by Xu and Dobson (2019). These features
were realised by establishing a dedicated physical space (BAT) that
Theoretical contributions fostered a vibrant innovation community. Stakeholders within this
space actively participate in the innovation process, acting as both
Our research offers five key theoretical contributions. First, we contributors (generating new knowledge and innovations) and recip-
demonstrate a shift from analysing individual entrepreneurship to ients (utilising knowledge to develop innovations). This dynamic
examining the complex network of relationships within EEs. This exchange aligns with the theory of absorptive capacity (Cohen & Lev-
shift is significant for both policymakers and researchers. inthal, 1990), which posits that such interactions facilitate the pro-
Second, our research describes a novel EE framework. This frame- ductive exchange of highly specialised information.
work aligns with Isenberg’s (2011) characteristics of a self-sustaining
EE and encompasses six domains: policy, markets, capital, human
skills, culture, and support. The BSB EE framework does not include Practical implications
explicit causal pathways, reflecting the "high bandwidth nature" of
policy, as described by Hausmann (2008). Effective policy must con- A crucial implication for policymakers is the need to shift from
sider multiple variables that interact in complex and specific ways. simply providing support to actively creating and nurturing an EE.
For example, providing support to entrepreneurs in the form of This requires a proactive approach, including a critical review of
space, capital, or loans is meaningful only if established companies existing policies and decisive actions to address shortcomings. Public
(e.g., large corporations) and governments are willing to engage agencies should identify and rectify policy mistakes, such as under-
startups as potential suppliers. This underscores the need for policy- prioritising public support or unintentionally discouraging entrepre-
makers to intervene holistically and adopt a comprehensive ecosys- neurial finance providers (Isenberg, 2011). This proactive approach is
tem perspective. exemplified by the Basque Country, where the pivotal support of the
Third, building upon the BSB EE framework that highlights the PCB, along with BEAZ, Bizkaia Talent, and Seed Capital, forms the cor-
importance of policy within EEs, our research contributes to the nerstone of the BSB EE, complemented by a pioneering comprehen-
nascent OI policy literature (Bogers et al., 2018; Di Minin & Cricchio, sive tax statute for entrepreneurs.
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The BSB EE offers a unique advantage by connecting startups with ecosystem who have contributed to this research for their support
early customers (large corporations). This interaction benefits both and generosity. All error and omissions remain ours.
parties. Startups gain valuable insights from established players,
allowing them to refine their products or services and secure crucial
references. Importantly, the revenue generated from these early cus- References
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